Dublin, 1st October 2013 - Vacancy On Some High Streets Remains Stubbornly High - Commercial property consultants CBRE today released their latest Irish Retail MarketView publication for Q3 2013. According to the report, against a backdrop of improved consumer spending, in line with an overall recovery in the commercial property market, activity in the retail sector has been brisk over the last six months.

According to Marie Hunt, Executive Director, CBRE Ireland “Although retail sales data remains volatile, there has been considerable leasing and sales activity occurring in the Irish retail market during 2013, particularly in the Dublin market, with a number of retailers actually now finding it difficult to secure stores in their preferred high street and shopping centre locations. However, this is clearly not the case in provincial locations where conditions remain difficult”.

The property consultants say that the issue of rates continues to frustrate retailers around the country and is particularly pertinent to retailers in locations where revaluations are currently taking place, including Dublin city centre and Waterford city centre. These assessments are due to take effect from the 1st of January next year. Unless retailers successfully appeal these rates assessments, significantly higher rates may be payable from next year. In many cases, the cost of rates is prohibitive relative to the rental payments payable, considering the extent to which prime rents have decreased from peak.

Prime Zone A rents on Grafton Street fell further to approximately €4,000 per square metre per annum during the first half of 2013 and are now a full 60% down on peak values which prevailed between 2006 and 2008. Prime Zone A rents on Dublin’s Henry Street are in the order of €3,500 per annum while rents in Dublin shopping centres range from between approximately €1,500 per square metre per annum in St. Stephen’s Green to approximately €3,000 per square metre per annum in Dundrum Town Centre. Prime rents are now beginning to stabilise at these levels although rental growth is likely to remain elusive in this sector for some time yet according to CBRE.

Figures provided by the Dublin Business Improvement District (BID) show that footfall on Dublin’s high streets has remained consistently high over the first half of 2013 and has shown year-on-year improvement over the last number of months. In total, footfall in the city centre in the first eight months of 2013 is up more than 4% on the same period in 2012.

Despite good underlying letting and sales activity during the first half of 2013, there has been little change in retail high street vacancy rates over the last six month period. Of 17 streets analysed by CBRE during Q3 2013, nine have recorded no change in their ground floor vacancy rate since the beginning of the year while only two have recorded an increase compared to Q1 2013. Six of the 17 streets analysed recorded a decrease in the rate of ground floor vacancy in Q3 2013 compared with six months previously as new entrants vie to negotiate transactions on units in good locations that are vacated by other tenants.

Streets that experienced a decline in the rate of vacancy compared to Q1 2013 include Castle Lane, Belfast; O’Connell Street, Sligo; Donegall Place, Belfast; Henry/Mary Street, Dublin; High Street, Kilkenny and High Street, Galway.

Unfortunately demand for retail premises in provincial Irish towns remains muted with many stores remaining vacant for a considerable period. Streets where there was no change in ground floor vacancy rates in the six months since Q1 2013 include Church Street/Dublin Street, Athlone; O’Connell Street, Limerick; Patrick Street, Cork; William Street, Galway; New Street, Killarney; Main Street, Killarney; Arthur Street, Belfast; Shop Street and Mainguard Street in Galway. Streets that recorded an increase in the rate of ground floor vacancy in the six month period included Grattan Street/Castle Street in Sligo, which had the highest rate of ground floor vacancy of any streets analysed by CBRE during Q3 2013. It is imperative that local authorities and community groups focus on coming up with workable solutions to target high levels of vacancy and dereliction in their areas.

Although the vacancy rate on Grafton Street in Dublin increased in the six month period, deals are underway on several of the units listed as vacant in the most recent survey with fit-out operations starting on others suggesting that that the vacancy rate will decline considerably over the next six month period. New entrants including the US retailer VANS, US retailer Levi Strauss; the UK retailer Cath Kidston and the Spanish retailer Massimo Dutti are all due to open new stores on the street over the coming months. The vacancy rate is therefore expected to decrease significantly when counts are next undertaken. This is also like to the be the case in Belfast where a number of retail lettings have recently been agreed.

As has been the trend in the Irish investment market for many years now, retail forms only a relatively small part of transactional activity on the basis that few high street or shopping centre investment opportunities have been released for sale. Although there has been a notable increase in the volume of deleveraging that has occurred in the Irish market over the last 12 months, very little prime retail property has come to the market. In fact, only 14% of investment activity in the first half of 2013 comprised retail properties. €47 million was invested in retail properties in the first three months of 2013 with a further €37.4 million invested in the sector during the second quarter of the year.

In line with trends in other sectors of the Irish investment market, prime retail yields have hardened over the last six month period. Prime high street retail yields are currently in the order of 5.5%, having peaked in 2006/2007 at 2.5% and troughed in 2008/2009 at 6.5%. In contrast, prime shopping centre yields are in the order of 6.75%, having peaked in 2006/2007 at 3.5% and troughed in 2009/2010 at 8.5%.

Having achieved strong double digit returns for many years, the retail sector saw total returns decline for four consecutive years between 2008 and 2009 according to the Investment Property Databank (IPD). Returns in 2012 and in the first half of 2013 have been marginally positive and it is expected that values will continue to appreciate from this point despite the fact that rental growth is not likely to materialise in this sector for the foreseeable future.

According to CBRE, it remains to be seen what impact, if any, bringing Budget 2014 forward to mid-October this year will have on the retail sector. Many retailers believe that it will lead to a stronger Autumn season with consumers having certainty about likely changes in their personal financial circumstances earlier in the year.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.

In Ireland, with offices in Dublin and Belfast, CBRE is the country’s largest commercial real estate services company, now employing over 110 employees and offering a full range of property services including property sales and acquisitions, leasing and management, investment, corporate services, debt advisory, project management, consultancy, valuations and research. Please visit our website at www.cbre.ie or www.cbre.ie./ni


CONTACT: Marie Hunt – 00 353 1 6185543 / 00 353 87 2727115 or e-mail:marie.hunt@cbre.com

Ireland Retail Marketview Q3 2013